Are taxes taking more than your employer?

January 26, 2009

I doubt it.

I know people who begrudge every dime of taxes they pay. But while they whine up and down about all the taxes that government takes out of their paycheck, they don’t seem as upset about what their employer takes out of their paycheck. Of course, what the government takes is clearly visible on the paycheck, while what the employer takes is not nearly so visible. For example, Class 5 typically charges $90/hr for most services. Yet the most I could possibly afford to pay an employee to provide those services works out to around $50/hr (and that’s with generous assumptions about how efficiently I can allocate overhead resources). So am I taking half my employee’s income?

Of course that would be absurd to say I’m taking half my employee’s income because I have to pay all sorts of overhead…advertising, office space, insurance, etc. etc. Plus I pay for many hours that aren’t billable. But really, is that so different than the government providing the overhead that makes the economy possible? The government pays most or all of the cost of our education. The government provides nearly all of the transportation and communication infrastructure that makes commerce possible. The government maintains order. It seems to me that government does just as much to provide me with gainful employment as I do for my employees. Why should an employee begrudge the government for taking about a quarter of earnings when employers often keep at least half, or often much more?

It’s unfortunate that people don’t recognize this obvious truth. Maybe if the government was able to take taxes from us before our wages show up on paychecks there wouldn’t be so much outrage.

Reagan/Bush NEVER cut taxes

January 21, 2009

As the Congress and Obama negotiate the latest economic stimulus package, one item sure to be debated is the size of “tax cuts”. Maybe it’s time the American people realize something: No President since Truman has ever cut taxes. Not Reagan, not Bush Sr, not Bush Jr, nobody. I say that because no President since Truman at the end of WWII has actually reduced government spending. The closest we’ve come in recent times was in 1989 when post-Cold War military spending cuts allowed us to increase government spending by less than inflation. Without actually reducing spending, we’re not actually reducing the tax burden. So WE’RE NOT CUTTING TAXES, WE’RE SIMPLY DEFERRING THEM.

For three decades the government has been deferring taxes at a level never seen before. How much more can we possibly afford to defer? As the size of the “tax cut” in the economic stimulus program is debated, “we the people” need to realize, and remind our representatives, that we’re not really talking about a tax cut, we’re simply talking about how much debt to deal with down the road.